Sponge Iron Market Size & Forecast Report - 2025 to 2030

The global sponge iron market size is anticipated to grow at a steady CAGR of around 6% during the forecast period from 2025 to 2030. The global market is witnessing steady growth, driven by increasing demand from the steel manufacturing industry, particularly for electric arc and induction furnaces. Sponge iron, also known as Direct Reduced Iron (DRI), is used as a substitute for steel scrap and is favored for its uniform composition and low impurity levels. As countries strive to modernize infrastructure and expand their construction and automotive sectors, the demand for high-quality steel—and thus sponge iron—is rising.

The Asia Pacific region, led by India, dominates the global sponge iron market due to its vast coal-based DRI production capacity and growing domestic steel consumption. India alone accounts for a significant share of global sponge iron production, supported by government policies encouraging local manufacturing and investments in renewable-energy-based DRI processes. Meanwhile, gas-based sponge iron is gaining popularity in regions like the Middle East and North America due to its lower carbon emissions. Overall, increasing focus on sustainable steelmaking and the push for reducing reliance on steel scrap imports are likely to accelerate the growth of the sponge iron market worldwide.

Market Snapshot:

Market Drivers:

The growth of the global sponge iron market is primarily driven by the rising global demand for steel, particularly in the construction, automotive, and infrastructure sectors. Sponge iron, due to its low impurity levels and consistent quality, is a preferred feedstock for electric arc and induction furnaces, which are increasingly replacing traditional blast furnaces in many regions. The shift toward electric steelmaking—a cleaner and more flexible process—is pushing demand for sponge iron, especially in developing economies like India, which is the world’s largest producer. Additionally, the need to reduce dependency on steel scrap, especially in regions with limited scrap availability, is further bolstering sponge iron consumption.

Another major driver is the push for decarbonization in the steel industry. Gas-based DRI production, which emits significantly less CO₂ than coal-based methods, is gaining popularity in the Middle East and North America, aligning with global climate commitments. A recent development (2024) includes ArcelorMittal’s investment in hydrogen-based DRI plants in Canada and Spain as part of their transition to low-carbon steelmaking. This highlights the growing momentum for green sponge iron, supported by government incentives and environmental regulations. As the global steel industry works to reduce its carbon footprint, sponge iron—especially when produced using renewable or low-carbon energy—will play an increasingly central role in the sustainable metallurgy landscape.

Market Trends:

Transition to Low‑Carbon DRI (Hydrogen & CCS)

A major transformation underway in the sponge iron industry is the shift toward low-carbon or green DRI production. Traditionally, sponge iron has been produced using coal or natural gas. However, growing concerns over carbon emissions and climate change are prompting a transition to hydrogen-based DRI, which significantly reduces CO₂ output. Countries in Europe and companies like ArcelorMittal and SSAB are investing in hydrogen-powered direct reduction plants. Additionally, Carbon Capture and Storage (CCS) is emerging as a bridging technology, especially in natural gas-based DRI plants. This trend aligns with the global steel industry’s broader decarbonization goals and climate targets set under the Paris Agreement.

Rise of Electric Arc Furnaces (EAFs)

Another key trend driving sponge iron demand is the rapid growth of Electric Arc Furnaces (EAFs) in steel production. EAFs are more flexible, efficient, and eco-friendly than traditional blast furnaces and are increasingly favored for new steelmaking capacities. Sponge iron, due to its high purity and consistent quality, is a vital feedstock for EAFs. With many developing countries—especially India, Vietnam, and Middle Eastern nations—expanding EAF capacity, the demand for sponge iron is set to grow. In fact, over 90% of new steel production facilities announced globally in the last two years are EAF-based, highlighting sponge iron’s growing importance in modern steel manufacturing.

Advancements in Production Technology

Technological innovation is reshaping how sponge iron is produced. Companies are adopting more efficient reactor designs such as rotary hearth furnaces, fluidized-bed reactors, and even AI-integrated process automation systems to improve output and reduce energy consumption. These technologies allow producers to enhance productivity while lowering emissions and operational costs. Additionally, many plants are incorporating waste heat recovery systems and integrating renewable energy sources to power their operations. These developments are particularly critical in countries with high production costs or stringent environmental standards.

Strong IP Growth & Innovation Focus

The sponge iron industry is experiencing a surge in intellectual property (IP) activity, reflecting increased investment in R&D. From 2010 to 2024, over 3,180 patents were filed worldwide relating to DRI technologies, with India, China, and the United States leading in patent volume. These patents cover a wide array of innovations, including cleaner reduction methods, improved metallization techniques, and energy-saving furnace designs. The rise in IP filings shows that both traditional steelmakers and technology providers are committed to developing next-generation, sustainable sponge iron production methods, further supporting long-term market growth.

Strategic Collaborations & Sustainability Pressure

As sustainability becomes a central concern, sponge iron producers are entering into strategic partnerships with technology firms, environmental solution providers, and research institutions. These collaborations aim to accelerate the adoption of cleaner technologies and promote knowledge sharing. Moreover, regulatory pressure—especially in Europe and North America—is pushing producers to comply with stricter emission standards. This has led to increased investment in natural gas-based DRI over coal and growing interest in alternative fuels and renewable integration. Industry players are also exploring circular economy models, such as recycling waste iron and improving energy efficiency in DRI plants.

Market Opportunities:

The global sponge iron market presents substantial growth opportunities, particularly as the global steel industry pivots toward sustainable and flexible production methods. One of the most significant opportunities lies in the rising adoption of electric arc furnaces (EAFs), especially in emerging economies like India, Vietnam, and countries in Africa and the Middle East. As EAFs become more popular due to their energy efficiency and lower emissions, the demand for sponge iron—an essential input for EAFs—is expected to surge. Additionally, with many countries working to reduce reliance on scrap metal imports, sponge iron provides a cost-effective and reliable alternative for domestic steelmakers. The growth of urban infrastructure, housing, and transport sectors globally further adds to the rising consumption of steel and, by extension, sponge iron.

Another major opportunity lies in the global push for green steel production, where hydrogen-based sponge iron plays a central role. With governments and companies committing to net-zero targets, producers are increasingly investing in renewable energy-integrated DRI plants. This shift opens doors for technology developers, equipment manufacturers, and green hydrogen suppliers to partner with sponge iron manufacturers. Furthermore, innovation in modular DRI units for small- and mid-scale steel producers presents opportunities in underdeveloped regions with growing steel demand. As of 2025, JSW Steel, one of India’s leading steel producers, has announced an investment of approximately $2 billion in a decarbonization program, aiming to reduce CO₂ emissions by 42% by 2030 compared to 2005 levels—highlighting the industry’s strong commitment to clean and sustainable ironmaking.

Market Insights:

By Raw Material:

The global sponge iron market is bifurcated into raw material, process, end-use industry, and geography. On the basis of raw material, the iron ore is the dominant raw material segment in the global market in 2024, primarily due to its indispensable role in both coal-based and gas-based DRI processes. As the base feedstock, iron ore is reduced to metallic iron in a solid state, making it the backbone of sponge iron production. High availability, consistent supply chains, and rising demand for high-grade iron ore pellets have strengthened its dominance. Countries such as India, Brazil, and Australia have abundant iron ore reserves, allowing producers to scale operations efficiently. With the shift toward electric arc furnace (EAF) steelmaking, there is a growing preference for iron ore pellets with low impurities, which improve metallization rates and reduce slag formation—enhancing furnace efficiency and reducing operational costs.

The dominance of iron ore is further reinforced by the global movement toward low-carbon steel production. Iron ore is more adaptable than coal in processes using natural gas or hydrogen as reducing agents, which are considered cleaner alternatives. For instance, gas-based DRI production (common in the Middle East and Latin America) uses iron ore pellets in fluidized bed or shaft furnaces, offering lower carbon emissions than coal-based alternatives. This compatibility with sustainable technologies ensures that iron ore remains central to the future of sponge iron production. As a result, iron ore’s share in the raw material mix is expected to grow further, especially with rising demand for green sponge iron and renewable energy-integrated DRI plants.

By End-Use Industry:

On the basis of end-use industry, the global sponge iron market is further segmented into steel manufacturing, construction, automotive, and others. The steel manufacturing sub-category dominated the global market in 2024, accounting for the largest share of consumption. Sponge iron (or Direct Reduced Iron) is a vital feedstock for Electric Arc Furnaces (EAFs) and induction furnaces, which are commonly used in secondary steelmaking. Its high iron content, low impurities, and consistent metallurgical properties make it ideal for producing quality steel. As many countries reduce reliance on scrap metal due to price volatility and quality concerns, sponge iron offers a reliable alternative that enables precise control over the chemical composition of steel. This has made it indispensable, especially in countries like India, which leads the world in sponge iron production and consumption for steelmaking.

The dominance of steel manufacturing is further reinforced by the global shift toward decarbonized steel production. EAF-based steelmaking, which primarily uses sponge iron, is considered more sustainable than traditional blast furnaces and is being adopted widely across Asia-Pacific, the Middle East, and Latin America. Moreover, with rising demand for steel in sectors like construction, infrastructure, energy, and machinery, sponge iron usage is expected to grow steadily. According to industry estimates, over 75% of sponge iron produced globally is consumed directly by the steel manufacturing sector, solidifying its position as the leading end-use industry in the market.

The sponge iron market research report presents the analysis of each segment from 2020 to 2030 considering 2024 as the base year for the research. The compounded annual growth rate (CAGR) for each respective segment is calculated for the forecast period from 2025 to 2030.

Historical & Forecast Period

• 2020-23 – Historical Year
• 2024 – Base Year
• 2025-2030 – Forecast Period

Market Segmentation:

By Raw Material:

• Iron Ore
• Coal

By Process:

• Coal-Based Sponge Iron (DRI)
• Gas-Based Sponge Iron

By End-Use Industry:

• Steel Manufacturing
• Construction
• Automotive
• Others

By Region:

• North America
• Europe
• Asia Pacific
• Latin America
• Middle East & Africa

Regional Analysis:

Geographically, the Asia Pacific region is the dominant player in the global sponge iron market, both in terms of production and consumption. This dominance is primarily driven by India, which is the world’s largest producer of sponge iron, accounting for a substantial share of global output. India’s leadership is supported by abundant reserves of iron ore and coal, a large number of coal-based DRI plants, and a strong domestic demand for steel. The country’s rapidly growing infrastructure, housing, and manufacturing sectors continue to fuel sponge iron consumption. In addition, favorable government initiatives like “Make in India” and significant investments in expanding electric arc furnace (EAF) and induction furnace capacities have further strengthened the region’s position.

Beyond India, other Asia Pacific countries like China and Vietnam are also contributing to regional growth. While China primarily relies on blast furnaces, its ongoing efforts to reduce carbon emissions have led to increased interest in DRI and EAF-based steelmaking. Moreover, Southeast Asian nations are seeing increased investment in mini-steel plants and sponge iron facilities to meet growing domestic steel demand. The region’s industrialization, urbanization, and large-scale infrastructure projects make it a long-term growth hub for sponge iron. With supportive policies, availability of raw materials, and rising green steel initiatives, Asia Pacific is expected to maintain its leading position in the sponge iron market in the coming years.

Competitive Landscape:

Some of the prominent market players operating in the global sponge iron market are ArcelorMittal, Tata Steel, JSW Steel, Nucor Corporation, and Rashtriya Ispat Nigam Limited (RINL). Companies are exploring markets by expansion, new investment, the introduction of new services, and collaboration as their preferred strategies. Players are exploring new geography through expansion and acquisition to gain a competitive advantage through joint synergy.

Key Companies:

• ArcelorMittal
• Tata Steel
• JSW Steel
• Nucor Corporation
• Rashtriya Ispat Nigam Limited (RINL)
• HBI Corporation
• Cargill, Inc.
• Gulf Coast Steel
• MESCO Steel
• Indian Metal & Ferro Alloys Ltd (IMFA)

Key Questions Answered by Sponge Iron Market Report

• Global sponge iron market forecasts from 2025-2030
• Regional market forecasts from 2025-2030 covering Asia-Pacific, North America, Europe, Middle East & Africa, and Latin America
• Country-level forecasts from 2025-2030 covering 15 major countries from the regions as mentioned above
• Sponge iron submarket forecasts from 2025-2030 covering the market by raw material, process, end-use industry, and geography
• Various industry models such as SWOT analysis, Value Chain Analysis about the market
• Analysis of the key factors driving and restraining the growth of the global, regional, and country-level sponge iron markets from 2025-2030
• Competitive Landscape and market positioning of top 10 players operating in the market